by Tyler Townsend
Financial Planning in Today’s Economy
Year 2008 was a challenging time for family finances. Retirement savings of young adults took a beating, reflecting the largest stock market decline since the Great Depression. Prices of homes, often a family’s largest asset, declined at an alarming rate. And the uncertainty of an economic recession has increased anxiety over possible job loss and the financial scramble that inevitably follows. As we cross the halfway point of 2009, families still very much feel the strain of the recession. During these challenging financial times, it is important to review family finances and make wise decisions that allow us to get more from our money.
During difficult times it is easy to become frustrated with the market, and it is tempting to delay contributions to retirement savings. Most often, the frustrated investor does not feel good about the market until it has demonstrated the ability to go back up, and of course by this time, the investor has missed out on important gains. Down markets, in fact, prove to have wonderful investment opportunities for long-term investors. It’s unfortunate to lose money during the decline, but don’t compound the problem by missing the eventual rebound. For this reason, it is important to continue contributing to company retirement plans and Individual Retirement Accounts (IRAs). For long-term investors, it is very likely that 2008 and 2009 will be viewed as good buying opportunities.
Building long-term financial security is a decades-long process that will naturally include market expansions and recessions. Making wise decisions throughout these market cycles is important to getting the most from your money. During the boom that led to the recent bust, the ease of obtaining credit unfortunately allowed many families to spend more than they earned. Down markets can be an important reminder that we should periodically review our expenses. Families not contributing an adequate amount to retirement, families that do not have an adequate emergency fund and families that use credit to fund everyday purchases are jeopardizing their opportunity to build a secure future. These families should take on the difficult challenge of permanently reducing spending.
During difficult financial times, it is important for young adults to continue adding to long-term savings and to live within their means. Tough decisions on spending and a strong discipline towards saving will help assure achievement of your family objectives. Best wishes for your family finances!
Tyler Townsend is a CERTIFIED FINANCIAL PLANNER ® professional with Townsend Financial and provides independent, fee-only financial planning and investment management services to families and small businesses.
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